Glenn S. Hodes Manager, ACAD Facility Sr. Energy Economist, UNEP Risoe Center

1. Catalyzing Green Growth and The Carbon Markets for Africa Glenn S. Hodes Manager, ACAD Facility Sr. Energy Economist, UNEP Risoe Center

2. Global Carbon Emissions (2008) by country South Africa and Nigeria are among the world’s biggest CO2 polluters

3. Forces new approaches for climate-resilient, green growth identify appropriate’ technologies and a strategy for their transfer and adoption tap into Africa’s abundant natural/renewable sources for more sustainable energy critical to development harness new sources of funding & foreign investment Climate finance can support Africa’s energy security as well as contribute to improved livelihoods Climate Change as an Opportunity

4. Energy Security in Africa: the Holy Grail? • Investment in the energy sector have chronically fallen short. • IMF (2009): 3.0% of Africa’s GDP needs to be invested in the power sector to achieve energy security. • High levels of load shedding and blackouts come at huge economic cost. • Power deficits in Nigeria cost economy approximately $1 billion per annum. • Continued reliance on temporary – often “dirty” energy supply contributes to high average, long-term costs and carbon footprint • Reliance on diesel and coal remains high in majority of African countries - despite abundant renewable resources • Diversification • Long-term rainfall levels, oil availability, and increasing commodity prices render diversification urgent

5. SA Renewables Market – Standard Bank Transaction Snapshot Geographical Overview Key points Renewable Energy Projects Exxaro Project 400 MW AECD 20 MW Yingli/Mulilo/ CADF Project 100 MW Navitas/ Sunray 150 MW TerraPower 4 MW Thupela Project 50 MW Sarge 50-150 MW Italgest 100 MW AECD 100 MW Ayoco/VentuSA/ Foster Wheeler Project 20-100 MW Clare Energy 84 MW TerraPower 50 MW SARGE 100 MW Group Five 25 MW EnerG/CEF/ Likusasa/Wasterite 50-75 MW Sol Africa Project 300 MW AECD 100 MW TWP Project 23 MW Alt E 100 MW Abengoa Project 23 MW Alt-e Project Scatec Target Projects 160 MWp (by 2013) 9 Sites Northern Cape 5 Sites Eastern Cape 400 MW Guodian/CADF/Mulilo Project 200 MW AECD 2x 500 MW TerraPower 10 MW Solaire Direct 42 MW TerraPower 60 MW BTE Wind 70 MW Astrum Solar PV Solar CSP Biogas Wind 100 MW AIM/Macquarie Project 74 MW Just Energy 60 MW Sarge 500 MW Multiple Mainstream Wind & Solar PV Projects Multiple Innowind Projects 68 MW Oelsner Group Projects 60 MW BTE Wind 100 MW Windlab 250 MW Genesys wind 300 MW AECD 57 MW Electrawinds 250 MW TerraPower 30-100 MW Concentrix/ Soitec Project 139 MW BTE Wind 350 MW TerraPower 156 MW Sarge 610 MW Rainmaker 500 MW TerraPower 50 MW Multiple Terra Power/ GE Projects 100 MW RedCap Investments Project 300 MW AECD

6. Africa requires about US$22-31 billion per year in by 2015, and $52-68 billion per year by 2030 to meet the climate change challenge. Countries pledged under the Copenhagen and Cancun agreements new/additional fast-track resources of $30 billion annually by 2012.

7. Climate FinanceNeeds: DevelopingCountries & Africa

8. What is the carbon market? • Carbon credits are a new commodity that’s globally traded • The main commodity is produced from Clean Development Mechanism or “CDM” projects, which is a project based offset system regulated by the UN that rewards developing countries who choose “greener” options • These credits can improve economic viability and attract additional financing to various projects, principally in the energy, waste, and infrastructure sectors • Demand for African credits is strong, activity is increasing. • African market lacks finance and catalysts to scale-up supply

9. Requirements for CDM approval • Host country : - meets EIA requirements, demonstrates positive sustainable development benefits • UN : • voluntary (i.e., no legal mandate) • proven GHG emissions reduced from baseline following carbon auditing processes & methodologies • Auditor : • Validate project as “additional” i.e. not common practice • investment or technological barriers that that can be overcome through additional carbon revenue

10. Carbon credits = measured, ex-poste difference between baseline and actual emissions Greenhouse gas emissions Project start Historical Trend Time How a CDM project generates carbon credits

11. Leveraging Private Capital & Carbon Markets The carbon market has mobilized billions of additional private capital for development. In Cancun the Parties affirmed a need to continue, reform, and upscale these markets Source: World Bank. 2011 State & Trends of the Carbon Market

12. About 6,725 projects in the CDM pipeline with 100+ new entering each month. There are around 180 projects registered or under validation in Africa. • UN has already issued 1.15 billion carbon credits, 700 million more projected by 2012 • Value of carbon credit trade flow to Africa already USD $1 billion/yr Source: UNEP Risoe Center CDM/JI Pipeline, Sep 2011

13. pCDM is suited to small-scale, dispersed activities Energy Efficiency Renewable Energy Solar water heaters Boiler-chiller upgrades/EE buildings EE clay bricks Transport Fuel switch or modal switch (i.e. cable cars) Biogas

14. Africa forging ahead with Programmatic CDM • Solar water heaters in South Africa (R) • Co-generation and tri-generation in South Africa • Composting of household waste in cities in Uganda (R) • Efficient light bulb distribution in Senegal • Energy Efficient stove dissemination in Zambia and Nigeria • Solar lamp distribution in Tanzania • Solar water heater programme in Tunisia (R) - developed based on UNEP supported program Africa has over 25% market share for pCDM vs. 3% for classic CDM

15. Source: South Pole CAM

16. Kick-starting the African Carbon Market

17. ACAD Facility • Innovative public-privatepartnership for green financing supported by the German Government’s (BMU) International Climate Initiative which aims to facilitate the realization and financial closure of highly replicable African carbon projects.  Launched in fall 2009. • ACAD addresses key barriers to more robust African carbon market by: • Enhancing transactional capacity within African banks • Reducing high early-stage costs/risks • Providing a jump-start financing solution • UNEP facilitates the partnership working closely with Standard Bank and other financial institutions and investors. • ACAD secretariat embedded in Standard Bank – Joburg

18. ACAD is a catalytic platform that works in a number of ways to help projects reach financial close and generate credits • Grant funding to help share CDM costs such as validation or registration • Capacity Building for local financial institutions • Funding of regional technical studies to ‘unblock’ issues in African market • Technical assistance/financial advisory from UNEP Risø and Standard Bank • So far 15 projects in 8 countries have been selected for ACAD funding. • For more information: • www.acadfacility.org

19. Example: IFM Cogeneration Project • Creates 17.1 MW of “autonomous” clean power from captured waste gas (normally flared to CO2) • “Leapfrogging” green technology for Africa • Ensures security of power and reduces ~200,000 tCO2 annually plus local air pollutants • ACAD grant to defray costs of validation and verification by a carbon auditor

20. Thank You ! Example: VSBK EE ClayBrickProduction Program For more information: www.acadfacility.org www.uneprisoe.org